The no-confidence motion against Prime Minister Paetongtarn Shinawatra recently focused on accusations of tax avoidance, but raised larger questions on whether they would exact a political price.
The no-confidence motion was spearheaded by Palang Pracharath Party MP Pimporn Pronpruektiphan, who expressed serious concerns regarding Paetongtarn's financial dealings. Central to the accusation is the claim that Paetongtarn may not have fully paid taxes on major transactions involving promissory notes (PN) and share transfers within her family.
Promissory notes and share transactions
Pimporn revealed that Paetongtarn had issued nine promissory notes for a total of 4.434 billion baht involving share transactions with her mother and other family members since 2016. These PNs, however, lacked details regarding the date of payment and the interest rate chargeable.
According to Thai law, a 3 per cent interest rate could be applied, resulting in an interest cost of 132 million baht per year, she said. This interest could potentially be taxed by the government, raising questions about whether the PM had fulfilled her tax obligations.
"While it is not clear that she broke the law, she might be in breach of the ethics of a political leader who people look up to as a role model," Pimporn argued. This statement underscores the dual nature of the accusations: while legal violations remain uncertain, ethical breaches are a significant concern for the public.
Pimporn argued that the acceptance of shares from family members as gifts would also be liable for taxation. There is no evidence, however, to suggest the necessary taxes were paid on these transactions.
Asset declaration and undisclosed income
Pimporn's accusations extended to Paetongtarn's asset declaration to the National Anti-Corruption Commission (NACC).
According to the opposition MP, Paetongtarn declared income generated from holding assets and rental income from properties, but she failed to mention tax payments on these incomes. This omission raises further suspicions about the PM's compliance with tax laws, she said.
Pimporn highlighted that Paetongtarn had transferred her shares to family members shortly before assuming the post of prime minister. The MP asserted that Paetongtarn did not pay taxes on the income generated from these share transactions, adding another layer to the allegations of tax avoidance.
Pimporn was not alone in her accusations. Wiroj Lakkhanaadisorn, a People's Party MP, echoed similar concerns. Though Paetongtarn transferred her shares to her mother and sister, there is no evidence that either of them paid taxes on these transactions, he said. Wiroj accused the PM of exploiting legal loopholes in share transactions to avoid paying taxes.
What is a promissory note?
A promissory note is a financial instrument that contains a written promise by one party (the issuer) to pay another party (the payee) a definite sum of money either on demand or at a specified future date. Promissory notes are often used in business and personal transactions as a means of securing loans or credit.
The promissory notes issued by Paetongtarn are of particular significance due to their high value and the lack of specific payment dates and interest rates. These omissions raise questions about the transparency and legality of the transactions, contributing to the overall suspicion of tax avoidance.
Paetongtarn’s response
In response to the allegations, the PM did not provide many details about the transactions. She simply defended herself, saying she had fully followed the law. She also took a dig at Wiroj, saying she paid much more in taxes than the MP.
She explained that the issuance of promissory notes since 2016 was part of company restructuring, and since the money had not yet been paid, there was no tax liability. She also assured that her asset declaration to the NCC was done transparently and that
she was currently in the process of defending herself against an allegation filed earlier with the NCC by a political activist .
The PM’s attack on Wiroj, boasting she paid much higher taxes than he did despite being younger to him, led to a public backlash against her.
Ethical and legal implications
The accusations against Paetongtarn carry not only legal but also ethical implications. Some critics argue that political ethics could be a decisive issue for the PM.
“It could be a matter of ethical breach,” says Prinya Thaewanarumitkul, director of the Law Centre at Thammasat University.
Thirachai Phuvanatnaranubala, former finance minister and a member of the Palang Pracharath Party, shares Prinya's view. He is suspicious about the purpose of issuing the promissory notes, explaining that typically such notes should specify the payment date and applicable rates, which Paetongtarn had failed to do.
"While Paetongtarn had informed the NCCC and the Revenue Department that issuing the PN was part of share transactions, she did not receive shares as gifts from her family. According to the law, a 5 per cent tax must be paid on the gift's value, yet she has not paid taxes over the past eight years, raising questions about tax compliance," said Thirachai.
PM Paetongtarn revealed that she plans to make her first promissory note payment next year.
Meanwhile Pinsai Suraswadi, the director-general of the Revenue Department, defended PM Paetongtarn, stating that issuing promissory notes for share transactions is not tax avoidance.
According to the law, share transactions outside the stock market require sellers to pay taxes if they make capital gains. “So, should PM Paetongtarn fulfill her promissory note obligation next year, share sellers must file for individual income tax payment in 2027,” added Pinsai.
Thirachai responded by insisting that Pinsai conduct a complete investigation before commenting on the matter.
Many others contend that the Constitutional Court may favor the government in interpreting the moral standards expected of a political leader if the case is filed in the tribunal court.
“In recent years, legal interpretations by the Constitutional Court have been politically motivated. With the ruling Pheu Thai Party now having a close relationship with the political establishment, the court would likely favor PM Paetongtarn,” said Titipol
Phakdeewanich, a political scientist at Ubon Ratchathani University. He believes the coalition government led by the Pheu Thai Party will serve its full term.
Somjai Phagaphasvivat, an independent political and economic academic, says it is not clear whether Paetongtarn’s actions on issuing promissory notes violated laws or breached moral standards.
This ambiguity stands in contrast to her predecessor, former prime minister Srettha Thavisin, who was dismissed last August by the Constitutional Court for grossly violating ethics by appointing an ex-convict as a Cabinet member. Srettha was in office for less than a year.
Somjai does not believe the tax issue will lead to political change, either through court rulings or potential street protests. He believes Paetongtarn and the coalition government will survive. Political change, if any, would come after the next round of general elections.
The political ramifications
Political ethics play a crucial role in shaping public perception and trust in leadership. The allegations against Paetongtarn test the boundaries of ethical behavior in politics.
Prasong Lertratanawisut, director of ISRA Institute Thai Press Development Foundation, foresees high risks for Paetongtarn. He referred to the ruling of the Supreme Court's Criminal Division for Political Office Holders in 2010 to seize the assets of former prime minister Thaksin — Paetongtarn's father — for abusing political power for personal gains.
In that case, the court ruled against Thaksin for using promissory notes as an instrument for share transactions with other members of the Shinawatra clan. The court ruled that no share transactions had actually taken place and therefore those shares still belonged to Thaksin.
It remains to be seen if history will repeat itself.
